The new health care reform law is full of new taxes and tax increases that will affect many individuals and businesses, but it may be years before most of these increases take a bite out of your -- or your company's -- wallet. The law also has tax breaks to help both individuals and small businesses pay for insurance.
Here are 13 changes included in the law:
1. A 10% excise tax on indoor tanning services provided after June 30.
2. Tax credits for small businesses that provide coverage for employees, starting this year. Employers with 10 or fewer workers and average annual wages of less than $25,000 can receive credits of up to 35% of their health premium costs each year through 2013. The credits are phased out for companies larger than that and disappear if companies have more than 25 employees or average annual wages of $50,000 or more.
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3. A requirement that businesses include the value of the health care benefits they provide to employees on W-2 forms, beginning with W-2s for 2011. The amount reported is not considered taxable income.
4. Elimination of a deduction employers now receive for providing Medicare Part D prescription drug coverage to their retirees to the extent that the federal government subsidizes the coverage. This will not go into effect until 2013.
5. A doubling of the penalty for nonqualified distributions from a health savings account, to 20%, beginning in 2011.
6. A $2,500-a-year limit on the amount that employees can contribute to a health care flexible spending account. The cap will go into effect in 2013.
7. A ban on using funds from flexible spending accounts, health reimbursement arrangements or health savings accounts for the cost of over-the-counter medications, starting in 2011.
8. Starting in 2013, a 0.9% Medicare surtax that will apply to wages in excess of $200,000 for single taxpayers and above $250,000 for married couples. Also, for the first time, a Medicare tax will apply to investment income of high earners. The 3.8% levy will hit the lesser of unearned income or the amount by which adjusted gross income exceeds the $200,000 or $250,000 thresholds. The new law defines unearned income as interest, dividends, capital gains, annuities, royalties and rents. Tax-exempt interest won't be included, nor will income from retirement accounts.
